[cryptography] Digital cash in the news...

Ian G iang at iang.org
Sat Jun 11 08:41:10 EDT 2011

On 11/06/11 7:42 PM, Eugen Leitl wrote:
> On Sat, Jun 11, 2011 at 02:16:55AM -0000, John Levine wrote:
>> In article<021CCBA9-9203-4896-8412-481B94595B20 at cs.columbia.edu>  you write:
>>> http://gcn.com/articles/2011/06/09/bitcoins-digital-currency-silk-road-charles-schumer-joe-manchin.aspx?s=gcndaily_100611
>> I wouldn't call bitcoins digital cash.  They're more like digital
>> tulip bulbs, or bearer shares of theglobe.com.
>> Whatever they are, it's a self limiting problem since the bubble will
>> burst soon enough.
> Unlike fiat currencies, algorithms assert limit of total volume.
> And the mint and transaction infrastructure is decentral, so there's
> no single point of control. These both are very useful properties.

Cryptographically and computer-science-wise, very elegant.  But that 
doesn't mean they are useful properties to any particular application.

We expect money to be a store of value, among a few other things. 
BitCoin has nothing in it that speaks to that goal, that I can see [0]. 
  This anti-property would however make it more ideal for a bubble [1].

Quite how to fix that and retain the decentralised control aspect, I'm 
unsure.  The essence of a contract is that someone delivers something to 
someone else;  without that first party (which speaks to centralisation 
at some level) it is hard.

Can we have a community promise that maintains in a distributed 
contract?  And delivers a store of value?  I'm not sure.  It's certainly 
an interesting thought experiment, I think I can see how to make it 
work, but not in the current circumstance.

> I don't expect Bitcoin to be it, but it is definitely a predecessor
> to a number of such currencies which will become practical both
> for machines and people.

That could be!  At an architectural level, I think that community is far 
too obsessed with the "big bad government" scenario when it comes to 
money issuance [2].  And looking for ways around this, when money is a 
far more complex subject than just one attacker.

In this sense, DigiCash and BitCoin are cypherpunk bubbles [3].  When we 
run out of geeks to be fascinated with the cryptographic elegance, the 
currency will collapse.


[0] It may be that people see decentralisation, and the algorithmic 
control over volumes as being that store of value.  But this is to 
confuse the primary requirement (store of value) with the secondary 
governance techniques used by some issuers (i.e., governments) who have 
a particular flaw of inflation to deal with.  IOW, BitCoin's design 
might be more appropriate if it were run by a government, perversely.

[1] E.g., tulip bulbs were not a store of value (I don't think they 
could last over the season, they had to be grown that season) whereas it 
is extremely rare for housing "bubbles" to collapse more than half their 
peak.  And normally it's like 10-20% of their peak, which is not really 
a bubble, just a correction from a bit too much exhuberance.

[2] David Chaum made the same mistake when he replicated the 
hand-to-hand payments transaction in blinding digitial coins.  His 
obsession with preserving the privacy feature implemented in the h2h 
method led to a very elegant cryptographic breakthrough, but took him 
too far away from the meaning of money and the consumer's real needs in 
making trade & transactions.  A privacy thing that isn't used as money 
isn't much use.  For another small example, the geeks amongst us 
insisted on client programs to manage the money, but the world transacts 
these days on browser access (Which by the bye requires some form of 
client-server architecture).  Which can be seen with Paypal;  oldtimers 
will recall it was originally a client program on Palm Pilots doing 
hand-to-hand transfers.

[3] and, the various other ne'redowellers in there.

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